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Tax Court Addresses Housing Allowances for Clergy with Two Homes
Driscoll v. Commissioner, 135 T.C. No. 27 (2010)

In 2010, the United States Tax Court ruled that a minister could apply a housing allowance to expenses incurred in two homes that he owned. The facts of the case and the court's ruling are summarized below.

Facts

An ordained minister was employed by a parachurch ministry. He owned a principal residence in Tennessee, and a second "vacation home" in the same state. At no time did he use either home for commercial purposes (i.e., as rental property). The ministry designated a housing allowance for him each year that he used for the payment of expenses on both homes, including mortgage payments, utilities, furnishings, improvements, and maintenance, such as lawn care, painting, and repairs.

The IRS audited the minister's tax returns for four years, and determined that the minister was not entitled for any of those years to exclude from taxable income the portion of his housing allowance that he used to pay housing expenses for his second home. The minister appealed to the Tax Court.

In support of his position that a housing allowance can be applied to the expenses associated with two homes, the minister argued:

The only limitation expressed by Congress in section 107 [of the tax code] was that amounts excluded from gross income be used to provide a property used as a dwelling place by the minister. The IRS has stipulated that the second home was so used, and that the amounts at issue were expended in connection with the acquisition and maintenance of that property. Accordingly, there is no basis under the statute to require the minister to include the amounts related to the second home in his gross income.

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